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02/12/2015

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We  offer cloud-based accounting solutions.  Using good technology saves time.  With the power of cloud accounting in your hands, you can access accurate real-time data on the go, accept instant payments and even automate repetitive tasks like invoicing. Fast, easy, touch-of-a-button software can make a real difference to the way you run your business.

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... a digital firm using the best tech to help our clients

Welcome to Adrian Mooy & Co Ltd

like yours grow and be more profitable.

We offer a personal service and welcome new clients.

We are a firm of Chartered Certified Accountants

and tax advisors in Derby helping businesses

From start-up to exit & everything in-between.

Whether you’re struggling with company formation,

Adrian Mooy & Co - Accountants Derby

Call us on 01332 202660

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annual accounts and taxation, payroll or VAT you can

count on us at every step of your business’s journey.  For

VAT & payroll please contact us.

If you are looking for a Derby accountant then please contact us.

○  Tax solutions to help you keep more of your income

○  Cloud-based accounting solutions

○  Transparent affordable pricing

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Services

We offer a range of high quality services

Web-based accounting

Xero is a web-based accounting system designed with the needs of small business owners in mind.

 

It can automatically connect to your bank and download your bank statements. From there it’s simple to tell Xero what transactions relate to and once told it remembers and looks out for similar transactions. This saves time and makes keeping your accounts up to date easier.

 

Log in from any web browser. As your accountant we can log in and provide help.

 

Making Tax Digital - VAT

Our process for delivering tax accounting vat self assessment and payroll services

 

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Our Process

Understand your needs

Firstly we listen and gain an understanding of your business and what you are aiming to achieve.

Continuous improvement

We seek your opinions on the service we provide and respond to feedback in order to upgrade and improve what we do.

Build a relationship

Success in business is based around relationships and trust. Our objective is to develop and build strong relationships with our clients, based on two way trust and respect.

Confirm your expectations

Our aim is  to help you maximise your business potential and we tailor our service to meet your requirements and agree a timetable for delivering them.

Actively communicate

Communication is important to the success of any commercial venture. It is therefore a vital part of our work with you, sharing the knowledge and ideas that help you to realise your ambitions.

Our Process

Understand your needs

Confirm your expectations

Actively communicate

Build a relationship

Continuous improvement

Straightforward and easy to deal with Adrian Mooy & Co provide an efficient, friendly and professional service - payroll, tax returns, annual accounts and VAT returns are always done on time.    Eddie Morris

Call us on 01332 202660

Testimonials

First class! Super accountant! We have been with Adrian Mooy & Co since 1994. They provide a prompt, accurate & reliable service. There is always someone at the end of the phone to help and advise us. They have always delivered and we are more than happy to recommend them.    Ian Cannon

Helpsheets

  • What are Super-deductions?

    A new tax investment incentive for companies

    Perhaps the most innovative give-away in the recent budget was “Super-deductions for investment expenditure”.

    What does this mean?

    Companies that invest in qualifying plant and machinery in the period from 1 April 2021 to 31 March 2023 will benefit from enhanced capital allowances. Investments in assets that qualify for the main rate of capital allowances of 18% will benefit from a 130% first-year allowance. This means that for every £100 that you spend, you can deduct £130 in computing your taxable profits. This is equivalent to a tax saving of 24.7%.

    What this does not mean?

    What this change does not mean is the notion that you can deduct 130% of the cost of a qualifying purchase from your tax bill. The deduction is made from your company’s taxable profits.

    For example…

    If your company invests say £5,000 in qualifying plant it will be able to write off £6,500 (£5,000 x 130%) against its taxable profits. If your company has taxable profits more than £6,500, it will save £1,235 (£6,500 x 19%) in corporation tax. Which means:

    ·         Your tax saving is 24.7% (£1,235/£5,000) of your investment cost, and

    ·         The net cost of your investment is effectively £3,765 (£5,000 - £1,235).

    Beware the fine print

    As you would expect, there will be circumstances – grey areas – where the legislation that maps out the do’s and don’ts to claiming this relief will deny you the 130% deduction. In their notes describing the proposed changes HMRC said:

    “Certain expenditures will be excluded…, there will be exclusions for used and second-hand assets and expenditures on contracts entered into prior to 3 March 2021 even if expenditures are incurred after 1 April 2021. Plant and machinery expenditure which is incurred under a Hire Purchase or similar contract must also meet additional conditions to qualify for the super-deduction...”

    And there are alternatives

    Even if you cannot claim this 130% Super-deduction, your expenditure may qualify for the existing 100% Annual Investment Allowance, a 50% or 100% First Year allowance or a range of writing down allowances.

    Check out if you could claim

    However, this is a significant incentive to invest if your company is likely to be profitable from 1 April 2021. To ensure that any significant investment you may make will qualify for the Super-deduction or to discuss other tax options, please call.

  • New system for 2019/20 late filing penalty appeals

    Due to the pandemic many taxpayers missed not only the usual 31 January 2021 deadline for submitting their 2019/20 self-assessment tax returns but the extended one of 28 February. To reduce admin for agents HMRC is introducing a simplified appeal process against the resulting penalties. How will it work?

    Taxpayers who missed the 28 February deadline for filing their 2019/20 self-assessment will automatically be charged a late filing penalty of £100. They have the right to appeal against the penalty if they have a reasonable excuse for filing late. This includes being prevented from meeting the deadline because of direct or indirect effects of the pandemic. HMRC expects this will apply to many taxpayers who are represented by accountants.

    HMRC is therefore providing a bulk appeal process which accountants can use to file appeals on behalf of their clients where coronavirus was the root cause their returns being late. The process will be available from 24‌‌‌ ‌March for a period of six months.

    There are conditions and exclusions for using the bulk service, for example accountants must use HMRC’s special template.

  • Electric cars from April 2021

    For 2020/21, it was possible to enjoy an electric company car as a tax-free benefit. While this will no longer be the case for 2021/22, electric and low emission cars remain a tax-efficient benefit.

    How are electric cars taxed? - Under the company car tax rules, a taxable benefit arises in respect of the private use of that car. The taxable amount (the cash equivalent value) is the ‘appropriate percentage’ of the list price of the car and optional accessories, after deducting any capital contribution made by the employee up to a maximum of £5,000. The amount is proportionately reduced where the car is not available throughout the tax year, and is further reduced to reflect any contributions required for private use.

    The appropriate percentage - The appropriate percentage depends on the level of the car’s CO2 emissions. For zero emission cars, regardless of whether the car was first registered on or after 6 April 2020 or before that date, the appropriate percentage for electric cars is 1% for 2021/22. For 2020/21 it was set at 0%.

    This means that the tax cost of an electric company car remains low in 2021/22.

    Example - J has an electric car with a list price of £30,000. The car was first registered on 1 April 2020.

    For 2020/21, the appropriate percentage for an electric car was 0%, meaning that J was able to enjoy the benefit of the private use of the car tax-free.

    For 2021/22, the appropriate percentage is 1%. Consequently, the taxable amount is £300 (1% of £30,000).

    If Jaz is a higher rate taxpayer, he will only pay tax of £120 on the benefit of his company car. If he is a basic rate taxpayer, he will pay £60 in tax. This is a very good deal.

    His employer will also pay Class 1A National Insurance of £41.40 (£300 @ 13.8%).

    For 2022/23 the appropriate percentage will increase to 2%.

    Low emission cars - If an electric car is not for you, it is still possible to have a tax efficient company car by choosing a low emission model.

    The way in which CO2 emissions are measured changed from 6 April 2020. For 2020/21 and 2021/22, the appropriate percentage also depends on the date on which the car was first registered as well as its CO2 emissions. For low emission cars within the 1—50g/km band, there is a further factor to take into account – the car’s electric range (or zero emission mileage). This is the distance that the car can travel on a single charge.

    The following table shows the appropriate percentages applying for low emission cars for 2021/22.

    Appropriate percentage for 2021/22 for cars with CO2 emissions of 1—50g/km

    Electric range                Cars first registered           Cars first registered

                                          before 6.4.2020                 on or after 6.42020

    More than 130 miles                  2%                                    1%

    70—129 miles                            5%                                    4%

    40—69 miles                              8%                                    7%

    30 – 39 miles                             12%                                  11%

    Less than 30 miles                    14%                                  13%

    As seen from the table, choosing a car with a good electric range can dramatically reduce the tax charge. Assuming a list price of £30,000, the taxable amount for a car first registered on or after 6 April 2020 with an electric range of at least 130 miles is £300 (£30,000 @ 1%); by contrast, the taxable amount for a car with the same list price first registered before 6 April 2020 with an electric range of less than 30 miles is £4,200 (£30,000 @ 14%).

    The moral is to choose a new greener model & you will be rewarded with a lower tax bill.

  • Dissolving a partnership

    A partnership can be either an ordinary partnership or a limited liability partnership (LLP); both forms comprise more than two people setting up in business sharing the risks, costs and responsibilities, as well as the profits. One consequence of being a member is that each is liable for the partnership's debts and obligations. There is no limit of liability for an ordinary partnership meaning that a claimant can sue either one or all of the partners for the full amount of their claim. LLPs have similar flexibility and tax status to ordinary partnerships. With the benefits of limited liability each partner is liable only for the amount of capital they invest.

    Informal partnerships

    The vast majority of partnerships are set up informally without a written partnership agreement and if this is the case, then dissolution is covered by the Partnership Act 1890. With just two members the partnership will dissolve automatically should one member die, is made bankrupt or resigns. Partnerships can also be forcibly dissolved when an event occurs that makes it unlawful for the business to continue or for partners to carry on as a partnership e.g., if an accountant has their practising certificate withdrawn. In this case the partnership will be dissolved, and a new one can be formed of the remaining members. If the partnership comprises two members or more then it can continue. In comparison, unlike ordinary partnerships, LLPs do not have to be dissolved on the resignation, death or bankruptcy of a member. Instead, the Limited Liability Partnerships Act 2000 applies a modified form of the law relating to companies’ insolvency and winding up.

    Individual partners

    Individual partners are taxed as sole traders but with their income being a share of the profits declared on the partnership tax return. If the partnership ceases, then the same cessation rules apply as if the partner was a sole trader such that if the final period of trading produces a loss for the partner leaving then that loss can be carried back for three years preceding the beginning of the accounting period in which the loss was incurred, provided part of that accounting period falls within the 12 months prior to cessation.

    Should the partnership dispose of assets held on dissolution (e.g. a property or properties), the partner is deemed to be disposing of his proportionate share of those properties. If a partner takes over ownership of an asset on dissolution then the partner receiving the asset is not regarded as disposing of his share. A computation will first be necessary of the gains which would be chargeable on the individual partners as if the asset had been disposed of at its current market value. Where the calculation results in a gain being attributed to the partner receiving the asset, then that gain is 'rolled over' (deferred) by reducing their cost by the amount of the gain. In this way the cost carried forward will be the market value of the asset at the date of distribution less the amount of gain attributed.

    Capital allowances

    On cessation, assets qualify for capital allowances that are not actually sold but taken over by one or more of the partners. These assets are deemed to be disposed of and immediately re-acquired at market value (unless the assets are actually disposed. Balancing allowances may be claimed if the market value is less than the written-down value. A balancing charge will be made if the market value is greater than the written-down.

  • Reporting Benefits in Kind (BiKs)

    Filing deadlines and tax saving tips for 2020-21

    At the end of each tax year, you will usually need to submit a P11D form to the tax office for each employee you have provided with expenses or benefits, for example, a company car.

    The total taxable benefits you provide to all employees will also create a Class 1A employer’s NIC charge, and this will need to be reported to HMRC by filing a further return, P11D(b).

    Note: If HMRC have asked you to submit a P11D(b), but you have no taxable benefits to report, you can tell them you do not owe Class 1A NIC by completing a formal declaration via your online government gateway account.

    What are the filing deadlines for 2020-21?

    What you need to doDeadline

    Submit your P11D forms online to HMRC - 6 July 2021

    Give your employees a copy of the information on your forms - 6 July 2021

    Tell HMRC the total amount of Class 1A National Insurance you owe on form P11D(b) - 6 July 2021

    Pay any Class 1A National Insurance owed on expenses or benefitsMust reach HMRC by 22 July 2021 (19 July 2021 if you pay by cheque)

    Note: You will be charged a penalty of £100 per 50 employees for each month or part month your P11D(b) is late. You will also be charged penalties and interest if you are late paying HMRC.

    Talk to us before you file your P11D returns

    There may be tax saving opportunities you could discuss with employees that would save them income tax and you the additional NIC charge. We have outlined two ideas for company car drivers you could consider below.

    Avoiding the car fuel benefit charge

    Employees not only pay additional tax for the use of a company car, but they also pay a hefty additional tax charge if their employer pays for private fuel. The car fuel benefit charge can be avoided if the employee records actual private mileage and repays their employer based on an agreed rate per mile.

    Were company car drivers furloughed during 2020-21?

    If any of your employees that had the use of a company car were furloughed during 2020-21, and the car was not made available for private use during this period, you can advise HMRC of the “not available” period when you complete their P11D. This will reduce any benefit charges for 2020-21.

    Let us help you crunch the numbers

    Please call if you would like to discuss options to reduce BiK tax charges for your employees or prepare and file the necessary returns. And do not forget, if you can reduce income tax charges for employees you will not only boost their moral, but you will also lower the amount of Class 1A NIC that you will have to pay as their employer.

  • Doing up properties – Are you trading?

    There can be money to be made buying a property in a dilapidated state, renovating it, and selling it for a profit. However, when it comes to tax, it is important to know whether the ‘profit’ element is a capital gain or a trading profit. This will determine how it is taxed and at what rate.

    Trading or investment

    The tax consequences will depend on whether the property is an investment or whether there is a trade. The question is whether you are a property developer or a property investor.

    Much of it comes down to your intention when you bought the property. If the aim was to buy the property, do it up and then let it out, the property will count as an investment property. However, if the intention is to buy, renovate and sell at a profit, HMRC may regard you as trading. However, an intention to sell at a profit at some point in the future does not automatically mean you are trading. Also plans change, and a property purchased as a long-term investment might be sold after a relatively short period of time as a result of a change in personal circumstances.

    Badges of trade

    The concept of the ‘badges of trade’ has been developed from case law and provides something of a checklist which can be used to determine whether an activity is a trade or an investment. The six badges of trade are as follows:

    1. The subject matter of the transaction.

    2. The length of the period of ownership.

    3. The frequency or number of similar transactions.

    4. Reasons for the sale.

    5. Motive when acquiring the asset.

    Where there is a trade, the property will only be held for as long as it takes to do up and sell. A property developer is likely to develop more than one property, either simultaneously or in succession. Where there is a trade, the property will be sold to realise a profit; for an investment property, the sale may be triggered by other factors.

    Case study 1

    Paul inherits some money and invests in a property, which he plans to do up and rent out. He completes the renovations and rents out the property for six years before selling it to enable him to buy a larger family home.

    The property was purchased as an investment and would be regarded as an investment property. The gain on sale would be liable to capital gains tax.

    Case study 2

    Mark sees a run-down property on the market and spots the opportunity to make a profit. He buys the property, spends six months renovating it, selling once complete, making a profit of £40,000. He invests the proceeds in another property to renovate and sell.

    Mark would be treated as trading. His aim is to sell the properties at a profit. Consequently, he would be liable to income tax rather than capital gains tax on the profit.

  • Bounce-Back loans - Pay as You Grow options

    You may have received, or are about to receive, a letter from your bank if you took out a government-backed Bounce-Back Loan (BBL) last year. You may remember that in the first year of the BBL no repayments were required, and the government picked up the tab for any setup costs and interest charges.

    Banks are therefore writing to remind account holders that BBL repayments are about to commence if the first year has expired. They are also including details of certain relaxations that are available following the Chancellor’s Pay as you Grow announcements last month.

    Repayment options. Pay as you Grow (PAYG)

    If you need to reduce your monthly repayments, you can advise your bank that you want to take advantage of one the following PAYG concessions:

    • Reduce monthly payment for six months by paying interest only. This option is available up to three times during the course of your BBL.

    • You could take a payment holiday for six months. This option is available once during the term of your BBL.

    • You could request an extension of your BBL loan term from six to ten years. This would reduce your monthly repayments. For example, on a £5,000 loan, monthly repayments would drop from £88.74 per month to £51.75 per month.

    You can use certain combinations of these options together, but as the banks will point out, all of these options will increase the overall interest costs of your loan.

    How might this affect your credit score?

    If you ultimately fail to meet your obligations to repay your BBL the government has fully guaranteed your loan. However, your bank will point out that failure to repay may affect your credit score.

    Rather cryptically, correspondence from High Street banks we have seen regarding the take-up of PAYG options, also includes the following remark:

    Using these options [PAYG] won’t affect your credit score, though it may influence how we assess your creditworthiness in the future…

    You would be forgiven if you were confused by the two contradictory remarks in this sentence.

    Should you take advantage of the PAYG options?

    If you have concerns that you need all the help you can get in the coming months and yes, you would like to make the most of the PAYG options, please call so we can discuss your options including any likely consequences for your credit worthiness.

  • Reduced rate of VAT for hospitality and leisure

    The hospitality and leisure industries have been severely affected by the Coronavirus pandemic. To help businesses in these sectors to get back on their feet, a reduced rate of VAT of 5% rather than the standard rate of 20% will apply to certain supplies for a limited period, from 15 July 2020 to 12 January 2021.

    Hospitality

    Food and drink supplied for consumption in the premises, for example by a restaurant or a bar, and hot takeaway food and beverages are normally liable for VAT at the standard rate of 20%. During the support period, the 5% rate will apply instead to:

    • hot and cold food for consumption on the premises on which they are supplied;

    • hot and cold non-alcoholic beverages for consumption on the premises on which they are supplied;

    • hot takeaway food for consumption off the premises on which it is supplied;

    • hot takeaway non-alcoholic beverages for consumption off the premises on which they are supplied.

    Hotel and holiday accommodation

    For businesses supplying hotel and holiday accommodation, the 5% rate VAT applies during the support period to:

    • supplies of sleeping accommodation in a hotel or similar establishment;

    • certain supplies of holiday accommodation;

    • charge fees for caravan pitches and associated facilities;

    • charge fees for tent pitches and camping facilities.

    Meals provided to guests in long-term holiday accommodation (more than 28 days) will also benefit from the reduced rate, but the hire of motor caravans will not.

    Admission to attractions

    The reduced rate of 5% also applies during the support period in respect of admission to certain attractions which would normally be liable for VAT at the standard rate. However, if the admission fee is exempt from VAT, this will take precedence over the 5% charge and the admission charge will remain exempt.

    The temporary reduction will apply to admissions to shows, theatre, circuses, fairs, amusement parks, concerts, museums, zoos, cinemas, exhibitions and similar cultural events where these are not included in the existing cultural exemption.

    Impact on flat rate scheme

    VAT registered businesses using the flat rate scheme should note that some of the flat rate percentages have been reduced to take account of the temporary reduction in the rate of VAT.

  • Personal and family companies – Optimal salary for 2021/22

    A popular profit extraction strategy for shareholders in personal and family companies is to pay a small salary and to extract further profits as dividends. The optimal salary will depend on whether the employment allowance is available to shelter any employer’s National Insurance liability that may arise.

    Preserving pension entitlement

    One of the main advantages of paying a small salary is to ensure that the year remains a qualifying year for state pension and contributory benefit purposes. To qualify for a full state pension on retirement, an individual needs 35 qualifying years.

    For the year to be a qualifying year, earnings must be at least equal to the lower earnings limit. A director has an annual earnings limit, and for 2021/22, the annual lower earnings limit is set at £6,240. Where the shareholder is not a director, earnings for each earnings period must be at least equal to the lower earnings limit. For 2021/22, the weekly and monthly thresholds are, respectively, £120 and £520.

    Contributions are payable by the employee at a notional zero rate on earnings between the lower earnings limit and the primary thresholds. The employee starts paying contributions once earnings exceed the primary threshold.

    Optimal salary – Employment allowance is not available

    The employment allowance is not available to companies where the sole employee is also a director. This means that personal companies will generally be unable to claim the allowance.

    For 2021/22, the primary threshold is set at £9,558 (£184 per week/£797 per month) and the secondary threshold is set at £8,840 (£170 per week, £737 per month).

    Although the maximum salary that can be paid without paying any National Insurance is one equal to the secondary threshold of £8,840 for 2021/22, it is beneficial to pay a higher salary equal to the primary threshold of £9,568. Employer’s National Insurance will be payable on the salary to the extent that it exceeds £8,840 at a cost of £100.46 (13.8% (£9,568 - £8,840)), however, this is outweighed by the corporation tax deduction at 19% on the additional salary and the employer’s NIC.

    Once the primary threshold is reached, employee contributions are payable at 12%. At this point, the combined National Insurance cost of 25.8% (13.8% + 12%) is more than the corporation tax saving and paying a salary in excess of the primary threshold is not worthwhile.

    Thus, where the employment allowance is not available, the optimal salary is equal to the primary threshold for 2021/22 of £9,568 (£184 per week, £797 per month).

    Optimal salary - Employment allowance is available

    In a family company scenario, the employment allowance will be available if there is more than one employee on the payroll. As long as the employment allowance is available to shelter the employer’s National Insurance that would otherwise arise, the optimal salary is one equal to the personal allowance, set at £12,570 for 2021/22. No National Insurance is payable until the primary threshold is reached. Above this level, employee National Insurance is payable at the rate of 12%. However, the additional salary saves corporation tax at 19%. However, once the personal allowance has been used, tax at 20% is payable as well as employee’s National Insurance of 12%, which exceed the corporation tax deduction of 19%.

    Thus, where the employment allowance is available, the optimal salary for 2021/22 is one equal to the personal allowance of £12,570 (£242 per week, £1,048 per month).

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  • If you commenced self-employment after 5th April 2019

    If you started your self-employment after 5 April 2019, you were initially denied support under the Self-Employed Income Support Scheme (SEISS) and the first three quarterly payouts to 31 January 2021.

    Thanks to a change in the recent Budget, you may be eligible – for the first time – to grants that will be made available for the quarter end 30 April 2021 and a final period to 30 September 2021.

    HMRC are adding a further security check

    To counter fraudulent use of the SEISS scheme, HMRC have decided to contact taxpayers who became self-employed during 2019-20, and who submitted a self-assessment return for that period.

    What will the letter say?

    The letter will tell you to expect a telephone call on the number provided on your tax return. If our contact details were added to your return, HMRC will ask us to pass on your contact number.

    On this occasion we cannot deal directly with HMRC and they will need to speak with you to obtain proof of identity and evidence of trade in the form of bank statements.

    Why a letter and then a phone call?

    Here’s what HMRC said:

    We are aware of increased scam activity related to HMRC’s coronavirus support schemes. The purpose of the letter is to explain to you that this is a genuine call, and to give customers details on how to recognise it as such.

    Worried about HMRC calling you?

    HMRC’s reason for this added layer of security seems to be to exclude fraudsters from making claims. But if you have any concerns regarding this process, please call.

  • Can you claim SEISS 4th & 5th payouts during 2021?

    If you commenced self-employment after 5th April 2019

    If you started your self-employment after 5 April 2019, you were denied support under this scheme from the first three quarterly payouts to 31 January 2021.

    The good news is that due to lobbying by tax professionals and self-employed support groups the SEISS is being opened to traders who commenced after 5 April 2019. However, there is an additional hurdle to jump before you can make a claim; your tax return for 2019-20 needs to have been filed by midnight 2 March 2021.

    Additionally, your business must be adversely affected by the pandemic and your profits from self-employment must be at least 50% of your income and less than £50,000.

    If you commenced self-employment on or before 5th April 2019

    If you qualified for the first three grants, you should qualify for the further grants due this year unless your circumstances have changed, for example, if you are no longer adversely affected by COVID disruption.

    For those of you who may be claiming for the first time, you will need to claim using your online tax account. HMRC should advise you when the claims process is open for business.

    If claiming the fourth grant – 1 February 2021 to 30 April 2021

    The fourth grant under the scheme covers February to April 2021. It is worth three months’ average profits capped at £7,500 and can be claimed from late April.

    If claiming the fifth and final grant – 1 May 2021 to 30 September 2021

    The fifth and final grant covers the period from May to September 2021. The amount of the grant will depend on the impact that Covid-19 disruption has had on your profits.

    • If your turnover has fallen by 30% or more because of Covid-19, you will be able to claim agrant equal to 80% of your average profits for three months, capped at £7,500.
    • However, if your turnover has dropped by less than 30%, you will be entitled to a reducedgrant of 30% of three months’ average profits, capped at £2,850.

    The final grant can be claimed from late July.

    There is a potential misfit in this fifth grant. Although it covers a five-month period (May – September 2021) the actual payout for this period is based on three months. What about the other two months?

  • More time to pay back deferred VAT and tax

    At the start of the pandemic, VAT registered businesses were given the option of deferring payment of any VAT that fell due in the period from 20 March 2020 to 30 June 2020. Self-assessment taxpayers were also given the option of delaying their second payment on account for 2019/20, which was due by 31 July 2020. In his Winter Economy Plan, the Chancellor extended the deadlines by which the deferred tax must be paid, giving further help to those struggling to pay their tax bills as a result of Coronavirus.

    VAT

    VAT-registered businesses which took advantage of the opportunity to delay paying VAT that fell due between 20 March 2020 and 30 June 2020 were originally required to pay the deferred VAT by 31 March 2021. However, there is now another option for those for whom this presents a challenge, and they can instead pay the deferred VAT in smaller equal instalments up to the end of March 2022. Those wishing to take advantage of the instalment option will need to opt into the scheme; failure to do this will mean that the VAT owed will need to be repaid by 31 March 2021. Where businesses are able, they can if they so wish pay the deferred VAT in full by 31 March 2021.

    Depending on the business’ VAT quarter dates, deferred VAT will relate to the quarter ending 29 February 2020, the quarter ending 31 March 2020 or the quarter ending 30 April 2020. VAT due after 30 June 2020 (i.e. for the quarter to 31 May 2020 and subsequent quarters) must be paid in full and on time. Where direct debits were cancelled, these should be reinstated if this has not already been done.

    Regardless of whether the instalment option is chosen or not, the deferred VAT will need to be paid in addition to the usual VAT payments, and it is prudent to budget for this.

    Self-assessment

    Under the original proposals, self-assessment taxpayers could delay paying their second payment on account for 2019/20 due by 31 July 2020 and instead pay it by 31 January 2021, along with any balancing payment due for 2019/20 and the first payment on account due for 2020/21. For some taxpayers who have been affected financially by the pandemic, this will be something of a stretch. In recognition of this, self-assessment taxpayers who are finding it difficult to pay what they owe can set up an automatic time to pay arrangement online, as long as they do not owe more than £30,000 in tax.

  • Advantages of using a property LLP

    A limited liability partnership (LLP) can be used for a property business and offers some advantages over unincorporated businesses and limited liability companies. A property LLP is something of a halfway house, providing the comfort of limited liability with the flexibility as to how profits are shared.

    The use of a property LLP can be particularly useful in a family situation where the individuals each hold property in their own name, but a different income split would be beneficial from a tax perspective.

    Setting up a property LLP

    Like a company, a property LLP must be registered at Companies House.

    An LLP can hold property in its own right. The LLP can acquire property or the partners can transfer property that they already own into the LLP.

    Transferring property into the LLP can be advantageous from a tax perspective. The property is held on trust in the LLP, but the underlying legal ownership is unchanged, meaning there is no SDLT to pay. Where a member transfers property into the LLP, the value of that property at the time of transfer forms the opening balance on their equity account.

    Flexibility to share profits and losses

    One of the key benefits of the LLP is the flexibility to share profits and losses. This provides the potential for a tax efficient distribution.

    The default position is to share profits and losses in accordance with the ratios on the members’ capital accounts. However, the ability to pay salaries in a different ratio provides flexibility to tailor the distribution in a tax efficient manner. Providing or withdrawing capital will also change the default profit sharing ratio.

    Tax position

    From a tax perspective, an LLP is transparent for tax purposes.

    This means that the individual partners are treated as being self-employed and must pay income tax on their share of the profits, and also Class 2 and Class 4 National Insurance contributions where relevant.

    Where a property is sold realising a gain, the individual partners pay capital gains tax on their share of the gain.

    Each individual partner must return their income from the LLP on their personal tax return. The LLP must file a partnership return.

    It is important that the LLP is carried on with a view to making a profit as anti-avoidance rules may apply which have the effect of switching the tax transparency off.

  • CIS compliance for property developers

    The Construction Industry Scheme (CIS) is a scheme whereby contractors of building firms are required to deduct tax at source from payments made to sub-contractors working for them. Some sub-contractors are entitled to be paid without any tax deduction, others at 30% as per HMRC's instructions but the majority have 20% tax withheld before payment. The scheme requires registration as a contractor and administration in the form of monthly submissions; the penalties for non and/or late submission can be severe.

    Definitions

    The definition of 'contractor' is widely drawn - HMRC's Construction Industry Scheme guide CIS 340 defines a (mainstream) contractor as 'a business or other concern that pays subcontractors for construction work. Contractors may be construction companies and building firms, but may also be ... many other businesses.'

    The definition of ‘construction work’ is again widely drawn to include the construction, alteration, repair, extension, demolition or dismantling of buildings and/or work - although there are exceptions. A business set up to undertake such construction work is obviously required to operate the scheme as would a property developer undertaking a trading business in construction of properties being developed for sale (even if just on one property). Private householders paying for work on their own homes will never fall within the CIS regime's scope.

    Buying property as an investment

    In comparison, someone who buys and rents out property typically does so as an investment; this would appear to be confirmed as under section 12080 of The Construction Industry Scheme Reform Manual it states that:

    "A 'property investment business' is not the same thing as a 'property developer'. A property investment business acquires and disposes of buildings for capital gain or uses the buildings for rental.“

    However, a problem arises when an investor landlord buys a property, doing it up intending to keep it as a rental property - is that person now a developer and therefore caught under the CIS rules? HMRC confirm that this is the case as further on in the CIS manual it states that:

    "Where a business that is ordinarily a property investor, undertakes activities attributed to those of ‘property development’, they will be considered a mainstream contractor [caught for CIS] during the period of that development".

    Therefore, the investor now becomes a developer liable to register as a contractor under the CIS regime even if just one property is renovated.

    Wider scope for the CIS scheme

    The system goes further because even where the landlord is predominantly a property investor and therefore not a construction business (e.g. a restaurant chain), they are deemed to be a contractor and subject to the CIS regime if they spend more than £1 million a year, on average, for three years on ‘construction operations’ (e.g. repairs, construction of extensions etc), on their premises or investment properties. There is a slight 'let out' in that such businesses can ignore expenditure on property such as offices or warehouses used by the business itself.

    Some businesses commission construction firms to undertake work for them but if the work is for the business's own premises, used for that business, then the business itself is not obliged to register or act as a CIS contractor.

    ‘De minimus’ limit

    There is a 'de minimus' limit in that on application, HMRC can authorise deemed contractors not to apply the scheme to small contracts for construction operations amounting to less than £1,000, excluding the cost of materials however this arrangement does not apply to mainstream contractors.

  • Legal v illegal dividends

    Changed business conditions in light of the Coronavirus pandemic have caused many companies to review their dividend policies not least because the company's financial position may have deteriorated significantly from that shown in its last annual accounts.

    The Companies Act 2006 requires that a dividend be paid only if there are sufficient distributable profits. Even if the bank account is in credit the company will need to have sufficient retained profits to cover the dividend at the date of payment. ‘Profit’ in this instance is defined as being ‘accumulated realised profits’.

    If a dividend is paid that proves to be more than this amount, is made out of capital or even made when there are losses that exceed the accumulated profits then this is termed ‘ultra vires’ and is, in effect, ‘illegal.’

    For private companies there is no need for full accounts to be prepared to prove sufficient profits in the calculation for an interim dividend but they will be needed for the declaration of a final dividend. HMRC’s Corporation Tax Manual states that the accounts need to be detailed enough to enable ‘a reasonable judgement to be made as to the amount of the distributable profits’ as at the payment date.

    Therefore, the financial status of the company needs to be considered each time a dividend payment is made which can prove difficult with the payment of interim dividends unless the company is VAT registered and the accountant does the VAT return calculations. The test must be satisfied "immediately before the dividend is declared" and this is generally interpreted to mean that the 'net assets' test must be satisfied immediately before the company's directors decide to pay the dividend. If the directors correctly prepare basic interim accounts and a dividend is paid based on those accounts then that will be deemed lawful, even if, when the final annual accounts, prepared at a later date, show that there was an insufficient amount for distributable profits.

    If regular amounts have been withdrawn then the amounts are deemed ‘illegal’ if at the date of each payment the management accounts show a trading loss or the profit cannot support the payment. HMRC will argue that ‘in the majority of such cases’ the director/shareholder of a close company will be aware (or had reasonable grounds to believe) that such a payment as dividend was ‘illegal'.

    A significant consequence of paying an ‘illegal’ dividend could arise if the company goes into liquidation when the liquidator or administrator routinely reviews the director's conduct over the three years before insolvency. If it is found that a dividend has been paid ‘illegally’ then under the Companies Act 2006 rules the shareholders will be expected to repay the amount withdrawn (or the ‘unlawful part’). HMRC will actively pursue this route being as they are often the largest unsecured creditor. Furthermore, under the Insolvency Act a director can be held personally liable for any breach of his or her fiduciary duty to the company.

    However, it is not only in liquidation that HMRC could open an enquiry into the treatment of a dividend. HMRC treats a dividend that it perceives to be illegal as being equivalent to a loan and, for a ‘close’ company, this means being a loan to a participator and as such it must be declared on the company tax return. If such a 'loan' is not so declared and the financial statements filed online show that the company’s reserves are in deficit at the end of the relevant period then HMRC may raise enquiries. Likewise where the opening balance next year is in deficit but dividends are still paid.

    HMRC have also been known to argue that the repayable amount is an interest-free loan and for a director employee could result in a taxable benefit-in-kind should the loan be less than £10,000.

  • NL Wage and NM Wage changes from April 2021

    Under the minimum wage legislation, workers must be paid at least the statutory minimum wage for their age. There are two types of minimum wage – the National Living Wage (NLW) and the National Minimum Wage (NMW). From 1 April 2021, as well as the usual annual increases, the age threshold for the National Living Wage is reduced.

    National Living Wage - The NLW is a higher statutory minimum wage payable to workers whose age is above NLW age threshold. Prior to 1 April 2021, it was payable to workers age 25 and above. From 1 April 2021, the NLW age threshold is reduced; from that date it must be paid to workers aged 23 and above.

    National Minimum Wage - The NMW is payable to workers who are below the age of entitlement to the NLW. Prior to 1 April 2021, the NMW applied to workers above compulsory school leaving age and under the age of 25; from 1 April 2021, the NMW must be paid to workers under the age of 23 and over the school leaving age.

    There are three NMW age bands:

    Workers aged 21 and 22 (prior to 1 April 2021, workers aged 21 to 24).

    Workers aged 18 to 20.

    Workers aged 16 and 17.

    Apprentices - There is also a separate NMW rate for apprentices. It is payable to apprentices under the age of 19 and also to those who are over the age of 19 and in the first year of their apprenticeship.

    Accommodation offset - Employers who provide their workers with accommodation are able to pay a lower minimum wage to allow for the cost of the accommodation provided. The amount that you are obliged to pay is found by deducting the ‘accommodation offset’ from the appropriate minimum wage for the worker’s age. The daily accommodation offset rate can be deducted for each full day for which accommodation is provided. For these purposes, a day runs from midnight to midnight. The weekly accommodation offset rate is seven times the daily rate.

    Rates from 1 April 2021

    NLW: Workers aged 23 and above £8.91 per hour

    NMW: Workers aged 21 and 22 £8.36 per hour

    NMW: Workers aged 18 to 20 £6.56 per hour

    NMW: Workers aged 16 and 17 £4.62 per hour

    NMW: Apprentice rate £4.30 per hour

    Accommodation offset £8.36 per day £58.52 per week

    Check you are paying the correct rates

    Employers should ensure that the amounts that they pay workers on the NLW or NMW from 1 April 2021 are in line with the new rates. They should also ensure that they have processes in place to identify when a worker moves into a new age bracket. From 1 April 2021, this will include workers aged 23 and 24 who will be entitled to the NLW from that date.

  • Statutory payments from April 2021

    By law, there are various statutory payments that an employer must make to an employee while the employee is absent from work due to the birth, adoption or death of a child. The employer must pay employees who meet the qualifying conditions at least the statutory amount for the relevant pay period. The statutory payment rates are increased from April 2021 and apply for the 2021/22 tax year.

    An employee is only entitled to statutory payments if their average earnings for the qualifying period are at least equal to the lower earnings limit for National Insurance purposes.

    Statutory maternity pay

    Statutory maternity pay (SMP) is payable to an employee who is on maternity leave. Although an employee can take up to 52 weeks’ statutory maternity leave, statutory maternity pay is only payable for 39 weeks. The payment ceases if the employee returns to work before the end of the maternity pay period (MPP).

    For the first six weeks of the MPP, SMP is payable at the rate of 90% of the employee’s average earnings. For the remainder of the MPP, SMP is paid at the lower of 90% of the employee’s average earnings and the standard amount. For 2021/22, this is set at £151.97 (up from £151.20 for 2020/21).

    Statutory adoption pay

    Statutory adoption pay (SAP) is payable to one parent on the adoption of a child. The other parent may be entitled to claim statutory paternity pay. The provisions for adoption pay and leave largely mirror those for maternity pay and leave – the employee is entitled to take up 52 weeks’ leave, while the adoption pay period (APP) runs for 39 weeks, unless the employee returns to work before the end of this period.

    As with SMP, SAP is payable at the rate of 90% of the employee’s average earnings for the first six weeks and at the standard amount, or 90% of the employee’s average earnings if lower, for the remainder of the adoption pay period. The standard amount is £151.97 per week for 2020/21.

    Statutory paternity pay

    Statutory paternity pay may be payable on the birth or the adoption of a child. The child’s father, mother’s partner or the adoptive parent who is not in receipt of SAP and leave may be entitled to statutory paternity leave and paternity pay. Eligible employees are entitled to two weeks’ statutory paternity leave which may be taken in a single block or in two one-week blocks.

    Statutory paternity pay is payable while the employee is on statutory paternity leave (as long as the eligible conditions are met) at the standard rate (£151.97 for 2021/22) or, if lower, at the rate of 90% of the employee’s average earnings.

    Shared parental pay

    The shared parental pay (ShPP) and leave provisions allow parents to share leave and pay following the birth or adoption of a child. Where an employee returns to work before the end of the MPP or APP, the employee can share the remaining leave and pay with their partner. Shared parental pay is payable at the standard amount, set at £151.97 for 2021/22, or where lower, at 90% of the employee’s average earnings.

    Statutory parental bereavement pay

    Parents are entitled to statutory parental bereavement leave following the death of a child under the age of 18 or a still birth after 24 weeks where this occurs on or after 6 April 2020. Bereaved parents are able to take two weeks’ parental bereavement leave, either in a single block or as two separate weeks. Eligible employees are also entitled to statutory parental bereavement pay (SPBP) at the standard amount (£151.97 for 2021/22) or, if less, at 90% of their average earnings.

  • Self-employment and the £2,000 dividend allowance

    and the £2,000 dividend allowance

    All taxpayers, regardless of the rate at which they pay tax, are entitled to a tax-free allowance for dividends. For 2020/21 this is set at £2,000, so if you’re thinking of branching out to be self-employed or have made the switch last year, this is what you need to consider.

    Nature of the allowance

    If you’re self-employed and own your limited company, you can take money out of your company as a dividend, or you may receive a dividend payment if you own company shares.

    Although termed the ‘dividend allowance’ it is in fact a zero rate band. Dividends covered by the allowance are taxed at a zero rate of tax, but count towards band earnings.

    Where the personal allowance has not been otherwise utilised, dividends sheltered by the personal allowance are also received free of tax.

    Dividends not covered by the allowance

    Where dividends are not sheltered by either the dividend allowance or the personal allowance, they are taxable at the dividend rates of tax. Where the taxpayer has different sources of income, dividends are treated as the top slice of income. For 2020/21, dividend income is taxed at 7.5% to the extent that it falls within the basic rate band, at 32.5% to the extent that it falls within the higher rate band and at 38.1% to the extent that it falls within the additional rate band.

    Using the 2020/21 allowance

    The dividend allowance is lost if it is not used in the tax year. As the end of the 2020/21 tax year approaches, it is sensible to review your dividend policy and consider whether it desirable, and indeed possible, to pay further dividends before the 2020/21 tax year comes to an end on 5 April 2021.

    Where an individual receives dividends both from their investments and their family or personal company, depending on their shareholdings, their dividend income may have fallen in 2020/21 as a result of the Covid-19 pandemic. This may provide the scope to pay higher dividends than normal from the family or personal company in order to utilise the allowance.

    However, remember that dividends can only be paid from retained earnings.

    Where profits are low for example if you have just started a business, or a loss has been made in 2020/21 as a result of the pandemic, this does not necessarily prohibit the payment of dividends – dividends can be paid as long as retained profits brought forward are sufficient to cover both any loss and any dividends paid out.

    To comply with company law requirements, dividends must be paid in accordance with shareholdings. However, using an alphabet share structure (such that one shareholder has A class share, another has B class shares, and so on) overcomes this restriction and allows dividend payments to be tailored to utilise family members’ unused dividend (and indeed personal) allowances for 2020/21.

  • Auto-enrolment -  Re-enrolment & re-declaration

    The Covid-19 pandemic has introduced many challenges for employers. However, despite the pandemic, their responsibilities in relation to auto-enrolment remain the same. The employer’s on-going duties include their re-enrolment and re-declaration obligations.

    Every 3 years, the employer must put certain members of staff back into their auto-enrolment pension scheme and complete a declaration to tell the Pensions Regulator that they have done so. This is known as re-enrolment and re-declaration.

    The key date is the third anniversary of the employer’s staging date or start date. Thereafter, the re-enrolment and re-declaration processes must be undertaken at three-year intervals.

    Re-enrolment

    Under re-enrolment, the employer must check:

    whether they have staff to put back into the pension scheme and re-enrol them; and

    write to staff who have been re-enrolled.

    To do this, the employer will need to assess staff who have left the scheme or who have reduced their contributions.

    Staff must be enrolled in a pension scheme automatically if:

    they are aged between 22 and State Pension Age.

    they earn over £10,000 a year (£833 a month, £192 a week).

    If staff who meet the above criteria have previously opted out, they need to be re-enrolled.

    Staff who need to be re-enrolled should be put back into the pension scheme within 6 weeks of the re-enrolment date. If this date is missed, it should be done within 6 weeks of the date on which staff were assessed.

    If an employee does not want to be a member of the scheme, they can opt out. However, they must be re-enrolled if they are eligible at the re-enrolment date; once re-enrolled they can opt out. Opting out lasts only until the next re-enrolment date, at which time they must be put back in (but can then opt out again if they want to). Employers must re-enrol eligible staff even if they know they want to opt out.

    Once staff have been re-enrolled, the employer must deduct employee contributions from their pay and pay them over to the scheme with the employer contributions.

    The employer must write to staff who have been re-enrolled to let them know, and also to inform them of the contributions that will be paid and that they can opt out if they want to.

    Re-declaration

    The final stage of the re-enrolment and re-declaration process is to submit the re-declaration of compliance. This has to be done regardless of whether or not staff have been put back into the pension scheme.

    The re-declaration of compliance is an online form which confirms to the Pensions Regulator the employer has met their legal obligations in relation to auto-enrolment. The re-declaration of compliance must be filed no later than 5 months from the third anniversary of the duties start date, or staging date, as appropriate. The deadline is the same regardless of whether staff within 6 weeks are assessed within of the re-enrolment date, or at a later date.

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Adrian Mooy & Co Ltd  -  61 Friar Gate  Derby  DE1 1DJ  -  adrian@adrianmooy.com

Adrian Mooy & Co - Accountants in Derby
61 Friar Gate Derby, Derbyshire DE1 1DJ
Phone: 01332 202660 Hours: Mon-Fri 9.00am - 5:00pm

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Adrian Mooy & Co is the trading name of Adrian Mooy & Co Ltd.  Registered in England No. 05770414.

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